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We often talk as if it is obvious what to count as merit and how to decide who has more (or less) of it. Is this really true?

Sometimes we speak as though everyone who applies for a job or to a school is normally judged on the basis of merit. But is this actually what happens? Small business people often hire relatives. Large companies often promote from within. State schools give preference to state residents. Private schools give preference to the children of their graduates. Veterans are sometimes given preference for government jobs. All of these practices violate the rule of merit. Are they unjust because they do so? How do they compare to affirmative action?